IMF predicts 6.7% growth for India

India's economic growth will be 6.7 per cent in the next financial year and will touch 7.5-8 per cent in the medium-term, feels the International Monetary Fund (IMF).

IMF Managing Director Rodrigo de Rato has termed the reform agenda set by the 2005-06 Budget "very positive" and praised the country's monetary management in absorbing oil shocks.

Underlining the need for more foreign direct investment, Rato asked the government to open up the economy with more reforms, especially in the areas like the special economic zone, labour and financial sectors.

"The actual rate of growth looks like 7.5-8 per cent in the medium term. That is a healthy objective," he said. , adding that growth in India was robust reaching nearly 7 per cent this fiscal year.

"There is keen awareness of the need to continue to strengthen India's fiscal position, open the economy more fully to the world and remove the remaining domestic contraints on growth," he said.

Rato appreciated the budget for allocating more resources to social and infrastructure sectors.

In his view, the "pause" exercised by Finance Minister P Chidambaram in meeting the target for reducing fiscal and revenue deficit would not significantly impact the fiscal reforms started last year. However, he said india needs to accelerate and broaden reforms, especially trade reforms.

Rato during his three-day visit held meetings with Prime Minister Manmohan Singh, Planning Commission deputy chairman Montek Singh Ahluwalia, Chidambaram, commerce minister Kamal Nath and Rserve Bank of India governor Y V Reddy. He also met Congress president Sonia Gandhi.

He appreciated the measures taken by RBI to contain inflation at acceptable levels despite the rapid rise in world oil prices last year.

He said RBI should continue to closely monitor the price developments to ensure new inflation pressure does not emerge, as domestic demand for oil was strong and the global crude prices volatile.

"Oil prices are to remain high in the next two years because of strong demand and supply constraints, especially refining and production," Rato said while suggesting the global community to "review" investment and production policies in oil sector and come up with a clear energy policy.

Acknowledging the country's strong economic fundamentals, Rato said the country does not need any help from multilateral agencies to combat the oil shocks.

Despite the price hike, rato said global economic growth will be strong at 4-5 per cent this year but it could slow down in the medium term if oil prices continue to rise.

On the weakening of American dollar, he said the United States needed to reduce its public deficit and increase savings.

While asking China to move over to a flexible exchange rate system, he said India was a good example on how to manage a flexible rate regime.

On the burgeoning forex reserves, he said, "The Indian monetary authorities are already coping up with that issue.

No new things have to be done to cope up with speculative money."